Middleton On The Move

One of the more significant recent acquisitions in the pest control industry occurred in June 2005, when Sunair Service Corporation acquired Orlando-based Middleton Lawn & Pest Control. Middleton was Sunair’s first foray into the pest control market and the platform company from which Sunair was to expand throughout the Southeast. Since that time Middleton has made more than 10 acquisitions throughout Florida. The company ranked 14th on the 2007 PCT Top 100 list with 2006 revenues in excess of $49 million. PCT’s Brad Harbison recently chatted with Middleton Chief Executive Officer Greg Clendenin to get an update on Middleton two years after selling to Sunair and also to learn more about Middleton’s acquisition strategy.

Q: What have been some of the benefits to joining forces with Sunair?

A: There comes a time in anyone’s business that if they are not going to pass it down to another generation — and that is often what happens in our industry — that you have to have an exit strategy. Part of our exit strategy was to cash out. (Middleton Owner) Chuck (Steinmetz) and I were made a nice offer and decided to cash out.

Another benefit is that you create a situation for the company to continue. By (selling to Sunair) our company was not absorbed by another company, but continued as it was. For those employees that came aboard with us it continues their vocation and career path. We also try to make a good career path for those employees who join us when we acquire their companies.

Q: Has Middleton been a good fit for Sunair as expected?

A: We were not integrated into another company, but we have been operating as a wholly-owned subsidiary. Our goal has been to acquire other companies and grow the company and increase our margins by acquiring other companies and getting those cost synergies out. And to also continue to grow the company organically. Our goal has been to create what we call a "superegional company."

Q: What have been some of the bigger challenges?

There’s always going to be challenges, but the strategy going forward was to use Middleton’s current systems and procedures — to use Middleton as a platform. When it’s done that way it minimizes what you might consider challenges. The challenges we have are to find willing sellers and to offer (sellers) something they perceive would be a better way to sell their company or would be a better entity to sell their company to. One of the things we have tried to do is assure the seller that we are going to create positions for their employees and take care of their customers. One of the challenges with buying other companies is that you are buying a different service strategy than what you have used to build your company. You have to find a way to blend in that service strategy so you don’t lose those customers you have acquired. One of things we’ve done is add more service strategies and more service frequencies than we had before we acquired these companies.

Q: What has been Middleton’s acquisition strategy since joining forces with Sunair?

A: Middleton had always grown without acquisitions. We had always grown organically. The real lion’s share of our growth came between 1997 and 2005, when we grew from $8 million to $35 million in (year-end) revenues. So, this acquisition phase is something we have not been through before. We’ve bought 10 companies since being acquired by Sunair Services Corporation and I think we have done a pretty good job of integrating those employees and retaining those customer bases. Prior to selling to Sunair the way we grew the company was opening new branches in new markets, hiring the people, training the people, putting in the marketing and advertising program and selling new accounts. And then from year to year, layer the growth up.

Q: What are you looking for in companies you acquire?

A: Typically, the companies we buy are $1 million or more in annual revenues, companies that have a pretty stable customer base, a pretty good EBITDA (an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization) margin, a pretty good base of recurring revenue and a pretty good reputation for service. Companies that have been run in such a way that you are not going in their facing a real mess in terms of service. For people looking to sell, there are things they can do to maximize their value. These include building that recurring customer base, providing good service and having good customer retention. Also, have a diverse customer base, so you don’t have 75 percent of your revenues in a handful of accounts. We target companies that have recurring revenue, have taken care of their assets and have taken pretty good care of their books.

Q: Middleton was brought in to be the platform company for acquisitions not just in Florida, but nationally. Why have all the acquisitions been limited to Florida?

A: One is that that is where the opportunities were. The other is that you get more cost synergies when you buy companies in your footprint and that helps with your bottom line. We have bought a couple companies that were not in our footprint. But these are areas where our service strategy and systems still fit in. Our service strategy will work in other parts of the country outside as well. Middleton is the platform company to be used to build the business in the Southeast part of the country, which includes Florida, Georgia, Mississippi, Alabama and Louisiana.

Q: How has your role at Middleton changed since the Sunair acquisition?

A: I am heavily involved in acquisitions and helping to find the companies and helping to sort out the EBITDA, the adjusted EBITDA — what it would look like after we bought it and participating in the negotiations with the company. I do a lot in terms of heading up the integration process. We have a great staff that functions as a team.

Q: What are future goals for the company?

A: What we are out to do is build value — and value is more of a long-term process. Our goal is grow the company — to increase the margins — through acquisitions and organically. We want to increase margins by running a good operation, having good customer retention, cross-selling to customers and adding salesmen to newly acquired companies so we continue to have that net gain in new accounts.

Q: Overall, how would you assess the way Middleton has performed in recent years?

A: One of the things that is important to do is measure the business. We are on a fiscal year from October to September. For the first nine months of this fiscal year — from October 2006 through June 2007 — our growth over last year is about 18 percent. We have about a 42 percent increase in our profits, so I’m proud of the job we’ve done. We are in the process of ramping up our sales force. We produced a new advertising campaign and we are beginning to see that have an effect on the lead flow. I think termite sales have been down industry-wide. So, in these times when business has not come as easy to us as it has in the past, you have to attack it. We are on the offensive. n

The author is Internet and managing editor of PCT and can be contacted at bharbison@giemedia.com.